Bankruptcy Beach Reading – Weil Bankruptcy Bloghttps://business-finance-restructuring.weil.com
Fri, 14 Dec 2018 18:17:18 +0000en-UShourly1https://wordpress.org/?v=4.9.9Highlights of Our Favorite Bankruptcy Quotes This Yearhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/highlights-of-our-favorite-bankruptcy-quotes-this-year/
Fri, 04 Sep 2015 14:13:30 +0000http://business-finance-restructuring.weil.com/?p=13607Monday is Labor Day. That means that the next three days are not only your last opportunity to wear white, but also the perfect time to enjoy the Weil Bankruptcy Blog’s last bit of Bankruptcy Beach Reading. To help you pass the time and forget that “summer’s almost gone” and […]

]]>Monday is Labor Day. That means that the next three days are not only your last opportunity to wear white, but also the perfect time to enjoy the Weil Bankruptcy Blog’s last bit of Bankruptcy Beach Reading. To help you pass the time and forget that “summer’s almost gone” and “winter is coming,” check out the shortlist of our favorite colorful bankruptcy quotes from the last few months.

The Honorable Michael Romero signals where he is going at the outset of his decision, which starts, “‘Life imitates art.’ The within dispute is reminiscent of Moby Dick, where Herman Mellville describes Captain Ahab’s self-destructive obsession to destroy a whale that had injured him in the past.”

Judge Romero’s decision is full of literary allusion:

Like Captain Ahab, the Randall Creditors have been obsessed with pursuing Experient into oblivion. . . . To phrase it plainly, the Court is unpersuaded by each of their objections to confirmation, and much like the fate of Captain Ahab, the objections to confirmation raised here are destined for the bottom of the deep blue sea.

Postscript

For good measure, Judge Romero also threw in this gem: “The Randall Creditors argue the Second Amended Plan unfairly discriminates between classes in violation of the fair and equitable test, and violates the absolute priority rule. ‘Pure applesauce.’”

Referring to a litigant who had violated a protective order and used confidential information for his own benefit, Judge Faris did not hold back:

This is the most egregious contempt I have seen in my entire career as a lawyer and a judge. . . . I would impose a substantially larger fine if I had the power to do so. Himmelfarb violated the orders because he hoped to garner tens of millions of dollars. A $9,000.00 fine is not even a slap on the wrist.

In re Walters features a chapter 11 debtor claiming that his mortgage debt was satisfied using self-created “International Promissory Notes” that purported to be legal tender of the United States. Mr. Walters also submitted a letter purporting to be from Pope Francis in support of the International Promissory Notes, as well as a letter objecting to the court’s personal jurisdiction over him and threatening “monetary fines, removal from position, arrest and trial in the world court for crimes against humanity.”

Any time a judge refers to his or her “war stories” in the first sentence of a decision, you know you are in for a good read…

While it is safe to say the average person does not have a working knowledge of the United States Bankruptcy Code, one widely held belief is that someone who files bankruptcy gets to walk away from their debts.3 [FN 3 – This statement is based upon almost 32 years’ experience as a bankruptcy lawyer and judge. I will spare you the war stories.] Those who work hard to pay what they owe find little comfort in this concept. In order to preserve the integrity of and support for the bankruptcy process, two principles have emerged: (1) a discharge in bankruptcy is reserved for the “honest but unfortunate debtor,” and (2) bankruptcy discharges are not for sale. While the first may not hold true in each and every case, the second one is absolutely essential to the survival of the system. These cases involve objections to discharge filed by creditors who wish to give up the fight. Settlements have been reached, each of which, if approved, will benefit the parties and result in the debtors being granted discharges. No one has objected; indeed, the United States Trustee supports both compromises. The question is whether the Court should approve them.

. . .

McCutchen is free to buy a restaurant from Walsh. He may not buy a discharge from anyone.

The term “etc.” has no substantive force (citing Yul Brenner in the The King and I):

[T]he court does not give credence to Defendants’ claims . . . based on “etc.,” which has no substantive force, see, Wikipedia entry for “etcetera,” stating that it “is a Latin expression that means “and other things,” or “and so forth”) http://en.wikipedia.org.wiki/Et_cetera, accessed on March 30, 2015 (“In the 1956 film The King and I, Yul Brynner, who played King Mongkut of Siam, repeatedly used the phrase, ‘… et cetera, et cetera, et cetera …’, to characterize the King as wanting to impress with his great knowledge of many things and his importance in not having to detail them. This was based on the usage in the book Anna and the King of Siam which related the real king’s playful interest in numerous things, with the phrase, ‘& c, & c.’) (footnotes omitted).

It’s not often that we get to read bench warrants written by bankruptcy judges. After two lawyers failed to comply with a court order to return legal fees to a chapter 7 debtor and pay sanctions, Judge Charles E. Rendlen III of the United States Bankruptcy Court for the Eastern District of Missouri issued a bench warrant for their arrest:

The Court is disappointed and irritated, although not surprised, that the seemingly never-ending contemptuous attitude of Robinson and Walton has now resulted in the need for the utilization of the valuable time, resources, and expertise of the U.S. Marshals. The Court is confident that the U.S. Marshals have many matters to address involving dangerous persons and urgent circumstances, and do not need the inconvenience of having to chase down bad-actor attorneys who believe that contempt is an acceptable form of professional practice.

The character Walter Sobchak once said, “This is bowling. There are rules.” If only the same could be said regarding how the law classifies property items in a bowling alley. The issue in this case is whether various pieces of property at the Antioch Bowling Lanes qualify as fixtures or personalty under Illinois law. A finding that the items constitute fixtures would inure to the benefit of FirstMerit Bank, N.A., which seeks to foreclose on a mortgage; a finding that the items constitute personalty would allow a creditor, Kenneth Sterbenz, to lay claim to the items. What complicates the inquiry is that the governing state law principles derive from dated and, at times, inconsistent caselaw. In some instances, courts have relied on certain criteria in holding that an item was a fixture, while on other occasions, different criteria have proved decisive.

Postscript

So as not to leave you in suspense, the court concluded that the debtor’s bowling lanes, including approaches, lane gutters, bowling ball return system, pin setting machines, and scoring consoles, were essential to the real property’s long-time use as a bowling alley and were fixtures, subject to FirstMerit’s mortgage. The court held that the laneside tables and chairs were personalty and could, therefore, be removed and sold by Kenneth Sterbenz.

***

Enjoy your long weekend! The Weil Bankruptcy Blog will return on Tuesday with more exciting reports from the restructuring world.

]]>Bankruptcy Puns: Available Today For Only Fifty Cents On The Dollarhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/available-today-for-only-fifty-cents-on-the-dollar/
Fri, 07 Aug 2015 16:13:29 +0000http://business-finance-restructuring.weil.com/?p=13456“Startin’ to feel like there’s nothin’ left to talk about but the, money, money Bill collectors keep comin’ . . . to get money, money” -Curtis James Jackson, III – “Money” On this summer Friday, this blogger would like to take a moment to reflect on the flexibility of chapter […]

On this summer Friday, this blogger would like to take a moment to reflect on the flexibility of chapter 11. Chapter 11 isn’t all about billion-dollar corporate debtors. It’s available to help out the little guy too (assuming you have a large amount of debt and/or complex finances)! From the likes of DMX to Anna Nicole Smith, celebrity bankruptcies are big news, and sometimes they result in significant changes in the law (see also Arkison, Wellness, and our other posts on the Stern Files). Though there have not been any legal fireworks yet, we here at the Weil Bankruptcy Blog have been entertaining ourselves by following the latest celebrity bankruptcy: that of rapper Fifty Cent.

As has been widely reported, on July 13, 2015, rapper Curtis James Jackson, III, better known by his stage name Fifty Cent, filed for chapter 11 protection in the United States Bankruptcy Court for the District of Connecticut. “Fifty,” whose hit albums Get Rich or Die Tryin, The Massacre, and Curtis have sold millions of copies, stated that the primary reason for his filing was his inability to satisfy two large court judgments. The first is a $7 million judgment owed to Lastonia Leviston because of a sex tape featuring Ms. Leviston that Mr. Jackson allegedly released to embarrass rival rapper Rick Ross. The second payment Fifty claims that he is unable to afford is an $18 million judgment related to a failed headphones venture with a company called Sleek Audio. In addition to the approximately $25 million in legal liabilities, Mr. Jackson also claims another $7 million in liabilities related to everything from maintaining his 21-bedroom home to leasing luxury cars. Based on disclosures about Fifty’s assets, liabilities, and financial condition made earlier this week, it also sounds as if Fifty has been doing a bit of “window shopping” – to the tune of $3,000 a month on clothes and $1,000 a month on personal grooming.

On Wednesday, Fifty had to answer (at least) 21 questions at his initial meeting of creditors. According to The Wall Street Journal, even the U.S. Trustee was getting in on the rap jokes. Abigail Hausberg, the U.S. Trustee’s representative, is quoted as saying that the “gist” of the meeting was Fifty essentially saying “you can’t get a dollar out of me.” One of the biggest questions left unanswered: what happened to Mr. Jackson’s earnings from Coca-Cola’s 2007 purchase of Glaceau Vitaminwater for $4.1 billion. Mr. Jackson, an early investor in Vitaminwater, reportedly earned up to $100 million from the sale, though his lawyers claim that the real number is lower. (The exact number has yet to be disclosed).

As the summer rolls along, we here at the Weil Bankruptcy Blog look forward to watching this case unfold. With this much money at stake and a personality as big as Fifty Cent’s there are sure to be some interesting developments over the coming months.

]]>Bittersweet Bankruptcy Beach Reading: A Eulogy for The Show Place and the Surflight Theatrehttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bittersweet-bankruptcy-beach-reading-a-eulogy-for-the-show-place-and-the-surflight-theater/
Fri, 31 Jul 2015 14:50:52 +0000http://business-finance-restructuring.weil.com/?p=13419Co-authored by Doron P. Kenter and Dana Kaufman. “Dream the impossible dream; eat the impossible sundae…” So the song goes – or rather, went – at The Show Place Ice Cream Parlour in Beach Haven, New Jersey. Sadly, The Show Place and the adjoining Surflight Theatre have closed their doors […]

“Dream the impossible dream; eat the impossible sundae…” So the song goes – or rather, went – at The Show Place Ice Cream Parlour in Beach Haven, New Jersey. Sadly, The Show Place and the adjoining Surflight Theatre have closed their doors and will be liquidating their assets in chapter 7. The authors have fond memories of shows at the Surflight and family outings to The Show Place, and we are now in the unenviable position of wishing the institution a melancholy happy trails. So for this installment of Bankruptcy Beach Reading, we take you to Long Beach Island, New Jersey, to bid farewell to the Surflight Theatre and The Show Place.

The Surflight Theatre was founded in 1950, with its first shows taking place in a tent by the beach. As Long Beach Island grew, so too did the Surflight, eventually constructing a 450-seat theater, which has stood in the same location in Beach Haven for the past thirty years. The Surflight put on high-quality shows in its short summer seasons and was a hub of arts and culture in the burgeoning beach communities on Long Beach Island. News sources report that in that time, it gave rise to a number of stage and screen personalities, including Jim Brochu, James Brennan, Charlotte D’Amboise, Ed Dixon, David Hartman, Richard Kind, David Loud, and Seth Rudetsky.

Incidentally, although Richard Kind is best known for Mad About You, Spin City, and his voice work for Pixar, he recently appeared in Sharknado 2: The Second One. Was his Surflight experience formative in his role in that timeless classic?

Also incidentally, Charlotte D’Amboise is married to Terrence Mann. No, not that Terrence Mann.

But we digress – back to the story.

Some forty years ago, The Show Place Ice Cream Parlour opened in the space adjoining the Surflight Theatre. The Show Place was a Broadway-themed ice cream shop, where the treats were named after iconic musicals. The servers (aspiring musical theater actors themselves, often working up to a role at the big stage next door) would perform during service, usually several times a night. But the best part of all was the audience participation. Frequently during ice cream service, a bell would ring, and out would come a singing server, fully equipped to embarrass someone (hopefully not you – but hopefully your brother/sister/mother/father/uncle/visiting European diplomat). You’d hear your server bellow something along the lines of “I have in my hand a Music Man Sundae…” and out she’d come with an enormous goblet of ice cream, ready to force some unwitting customer to stand up and sing a short ditty about the ice cream treat that he or she was about to enjoy in red-faced satisfaction. Even the flavors of ice cream would be recited in song (“What kind of ice cream do we have?! We have butter pecan, chocolate chip mint, peanut butter, peanut butter, peanut butter, orange sorbet, raspberry sorbet. . .”) And alas, woe to the moms and dads who would order a cup of coffee (“Hey lady, this is an ice cream parlor!!”). Of course, after you’ve finished your ice cream, out came the crazy hats for everyone to wear during the grand finale!

The authors – and countless other kids of all ages – spent summer after summer waiting for “Show Place night,” when we’d all head off to the The Show Place for ice cream and a show. But no more. After a 2010 chapter 11 reorganization, and beset with the continuing economic downturn, the devastation caused by Hurricane Sandy and a theater fire in 2012, high operating costs, and other external factors, the Surflight was forced to file a chapter 7 petition in February 2015. Notwithstanding efforts to the keep the theater (and ice cream parlor) open, no savior could be found, and the Surflight’s chapter 7 trustee announced plans to sell off the debtor’s assets in a court-approved auction, scheduled for August 6.

We are sorry to see that the last days of the Surflight and The Show Place have passed. We had hoped for one last summer, and the chance to share “Show Place night” with one more generation. But so it goes, and the memories will linger. In the words of Dr. Archibald “Moonlight” Graham: ”Once a place touches you like this, the wind never blows so cold again. You feel for it, like it was your child. . . .” Because you see, sometimes life rolls by like an army of steamrollers. This country has been erased like a blackboard; rebuilt and erased again. But The Show Place and the Surflight are a part of our past – they remind us of all that once was good. We will miss them dearly.

Additional information regarding the Surflight auction is available here.

]]>A Tale of Two Residenceshttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/a-tale-of-two-residences/
Fri, 24 Jul 2015 19:21:42 +0000http://business-finance-restructuring.weil.com/?p=13366We had a dream we’d go trav’lin, together We’d spread a little lovin then we’d keep movin’ on Trav’lin’ along there’s a song that we’re singin’, C’mon get happy A whole lotta lovin’ is what we’ll be bringin’, We’ll make you happy, We’ll make you happy (from “C’Mon Get Happy”) […]

]]>We had a dream we’d go trav’lin, together
We’d spread a little lovin then we’d keep movin’ on
Trav’lin’ along there’s a song that we’re singin’,
C’mon get happy
A whole lotta lovin’ is what we’ll be bringin’,
We’ll make you happy,
We’ll make you happy

(from “C’Mon Get Happy”)

This edition of Bankruptcy Beach Reading takes us on a summer road trip from the sandy beaches of Fort Lauderdale, Florida to the beautiful mountains of Colorado to explore two very different residences through two bankruptcy cases filed a day apart in February of this year.

First to Florida and the pending chapter 11 case of Mr. David Cassidy: member of the Partridge Family, teen heart-throb and, for our younger readers, father of Katie Cassidy (model and actress appearing on the CW’s The Arrow). Following a rough year of DWI arrests and divorce proceedings, Cassidy filed for chapter 11 bankruptcy on February 11, 2015. Cassidy’s $3 million plus residence is a “beautiful seven thousand square foot family residence located on the water in the Harbor Beach neighborhood of Fort Lauderdale Florida” and is burdened by secured debt of approximately $1.65 million. Because of his extensive travel schedule and pending divorce, Cassidy no longer requires such a large residence and, accordingly, moved to sell the residence under section 363 of the Bankruptcy Code free and clear of all liens and other encumbrances. Both the bank, secured by the residence, and Cassidy’s soon to be ex-wife agreed to the sale of the residence via auction and the proposed disposition of the sale proceeds. Specifically, Cassidy proposed that, after auction fees and costs, proceeds would be used to satisfy creditors secured by the property, with any remaining proceeds to be distributed in accordance with the divorce and bankruptcy proceedings. The bankruptcy court granted the motion on June 29, 2015, and the auction, for any interested parties willing to put down a $200,000 deposit, will be held on September 9, 2015.

Moving on to Colorado, we have a very different residence. Mr. Edward Romero filed for chapter 7 bankruptcy on February 12, 2015 claiming a homestead exemption for his residence – a 1997 Peterbilt truck worth approximately $45,000. Mr. Romero has lived in the Peterbilt since 1998. It is equipped with a bed, refrigerator, microwave, television and self-enclosed portable toilet. A small kennel for Mr. Romero’s dog remains by the bed. The debtor, an independent truck driver, sleeps in the Peterbilt approximately 20-25 days a month while on the road travelling throughout the United States. Mr. Romero has no other permanent residence or place to sleep, not even the one small room he rents from his son as an office for his trucking business. For the few nights when not travelling, he stays as a guest of friends or family. Though home is usually where you hang your hat, the bankruptcy court in Colorado, driven by the necessity of statutory interpretation, could not agree that the Peterbilt qualified as a homestead. The bankruptcy court was stymied by modifications to Colorado’s homestead exemption specifically addressing manufactured homes, and not including vehicles such as the Peterbilt, and the traditional meaning of homestead under Colorado law, which requires an association with land. Recognizing the potential inequities of the ruling, however, the bankruptcy court suggested that the debtor may be able to claim another exemption under Colorado law, such as the exemption for equipment used to carry on gainful occupation or for a motor vehicle, or explore his alternatives under chapter 13 of the Bankruptcy Code.

We are rooting for both Mr. Cassidy and Mr. Romero. Surely, though, we are not alone in seeing the opportunity for great television (not unlike Mr. Cassidy’s original series!). Whether poignant sitcom or cheesy reality TV, the script almost writes itself. Two down on their luck travelers meet in bankruptcy court and decide to travel the country together living in a certain colorfully painted bus. It would be called, of course, C’mon Get Happy. Perhaps it would even sway the hearts and minds of legislators to amend the homestead exemption for such a bus, just in case.

]]>Two Become One: Eighth Circuit Rules That Separated Couple Must Substantively Consolidate Their Estateshttps://business-finance-restructuring.weil.com/substantive-consolidation/two-become-one-eighth-circuit-rules-that-separated-couple-must-substantively-consolidate-their-estates/
Fri, 05 Jun 2015 16:11:22 +0000http://business-finance-restructuring.weil.com/?p=13149Contributed by Alana Katz. ‘Cause Tonight / Is the Night / When 2 Become 1 -The Spice Girls According to UrbanDictionary.com, the word “separated” is described as “[t]he purgatory between marriage and divorce.” This also holds true in the bankruptcy process. The Eighth Circuit recently held in Boellner v. Dowden […]

According to UrbanDictionary.com, the word “separated” is described as “[t]he purgatory between marriage and divorce.” This also holds true in the bankruptcy process. The Eighth Circuit recently held in Boellner v. Dowden that a separated couple must substantively consolidate their bankruptcy estates, based on the facts and circumstances surrounding their separation. The court was ultimately concerned that the couple was trying to “double dip” their exemptions to the disadvantage of their creditors.

Facts

The debtors, a married and separated couple, filed separate chapter 7 petitions in the Bankruptcy Court for the Eastern District of Arkansas. At the time of filing, the debtors shared a checking account, several credit cards, a leased car, and were jointly and severally liable for a judgment in a civil case. They did, however, maintain separate homes—the wife’s home was unencumbered, while the husband’s home was in the process of being surrendered to a mortgage holder. The couple also maintained separate insurance policies, annuities, and credit card debt.

In a chapter 7 case, a debtor is entitled to a certain amount of exemptions, which allow the debtor to withhold specific items from a bankruptcy estate as a matter of law. A debtor must choose between the federal exemptions—embodied in section 522(d) of the Bankruptcy Code—and the state law exemptions where the debtor is domiciled, which can vary greatly. A strategic debtor will generally try to choose the exemptions that will protect the debtor’s most prized assets. A debtor cannot have two bites at the apple and must choose to insulate assets under either federal or state law.

Here, the schedules for each debtor revealed that the husband had claimed his annuities as exempt under section 522(d), while the wife exempted her unencumbered home under Arkansas state law. The chapter 7 trustee argued that the two debtors’ assets, liabilities, and handling of financial affairs were substantially indistinguishable, and allowing them to maintain separate bankruptcy estates would prejudice their creditors as they would be able to “stack” both federal and state law exemptions and withhold a greater number of assets from their estates. If the debtors’ estates were substantively consolidated, however, the debtors would be forced to choose one exemption scheme, and creditors would be able to collect from a shared pool of non-exempt assets.

The bankruptcy court ordered substantive consolidation of the debtors’ estates after considering the following factors: (1) whether the debtors were interrelated; (2) whether the benefit of consolidation outweighed the harm to creditors; and (3) whether any prejudice would result from allowing the debtors to maintain separate bankruptcy estates. The district court affirmed the bankruptcy court’s order and denied the debtors’ motion for reconsideration. On appeal, the Eighth Circuit analyzed whether the bankruptcy court abused its discretion in ordering substantive consolidation.

Analysis

In deciding whether to affirm the lower courts’ decisions, the circuit court relied on the case of In re Reider, in which the Eleventh Circuit, in assessing whether to order substantive consolidation between spouses, held that the court must analyze whether a “substantial identity” exists between debtor spouses and, ultimately, must be persuaded that creditors will suffer greater prejudice in the absence of consolidation than the debtors will suffer from its imposition.

The court held that the bankruptcy court properly analyzed the evidence, which included the debtors’ statements of financial affairs and schedules. In particular, the court found it peculiar that one debtor claimed to own the couple’s home, while the other spouse claimed ownership of the household goods. Further, in addition to the joint assets and liabilities discussed above, the court noted that the debtors’ separate statements of financial affairs indicated that they had jointly withdrawn funds from IRA accounts. The court found that this evidence was sufficient to establish a substantial identity between the debtors.

Finally, the court found that if the debtors’ estates were not substantively consolidated, creditors would receive no distribution or significantly less distribution than they would in a joint case. In particular, the court noted that if the debtors were allowed to exempt their home and annuities under different exemptions, their separate estates would have significantly less value than if they were combined and forced to choose either the federal or state exemptions, significantly harming their creditors. The court therefore held that the bankruptcy court did not abuse its discretion in ordering substantive consolidation of the estates.

Conclusion

Although this decision applies to individual debtors, the concept of substantive consolidation affects corporations as well. Determining whether a “substantial identity” exists between two individuals, particularly two individuals who ostensibly are no longer living together, certainly raises different questions than those typically asked in the corporate context. What would “piercing the individual veil” mean? Is there a concept of “individual separateness” that should be respected? We also could muse on the different philosophical views of the “individual” – empiricism, Hegelian, existentialism, Buddhism, and objectivism (among others) – and how those might be applied to bankruptcy law. We will leave that intellectual exercise, however, to the philosopher kings (and queens) among us.

]]>Fake It ‘til You Make It — or at Least Keep the Frivolous to a De Minimishttps://business-finance-restructuring.weil.com/professionals/fake-it-til-you-make-it-or-at-least-keep-the-frivolous-to-a-de-minimis/
Fri, 22 May 2015 16:30:33 +0000http://business-finance-restructuring.weil.com/?p=12996Contributed by Danielle Donovan What does Memorial Day weekend mean to you? Perhaps it means having a nice long weekend with family and friends? Or spending hours sitting in traffic with all the people who are getting away from it all for the weekend? Or maybe you are a traditionalist […]

What does Memorial Day weekend mean to you? Perhaps it means having a nice long weekend with family and friends? Or spending hours sitting in traffic with all the people who are getting away from it all for the weekend? Or maybe you are a traditionalist and will spend the weekend getting all of your white clothes out of Manhattan Mini Storage. Well, for the Weil Bankruptcy Blog, the start of Memorial Day weekend means one thing — the return of Bankruptcy Beach Reading.

Our first Bankruptcy Beach Reading post of the season tells a tale of some things not to do if an attorney does not want to get burned by Rule 9011. Although this story focuses on events in an individual debtor’s case, one can easily see how stretching the law or the facts could apply in a chapter 11 case.

The self-empowerment saying, “fake it ‘til you make it” can be traced all the way back to Aristotle, the philosopher who taught us that to be virtuous, one must act as a virtuous person would act and that men acquire a particular quality by constantly acting a particular way. To be a bankruptcy attorney, one must do certain things, like say, research the relevant law, acknowledge fundamental principles of bankruptcy, take a glance or two at the Bankruptcy Code . . . things of that nature. In re Nakhuda, a recent decision from the Bankruptcy Court for the Northern District of California, is an extreme example of what not to do if you want to pass as a competent attorney, let alone a bankruptcy attorney. Caution: don’t try this in your courtroom.

What would have been a routine chapter 7 case in which the debtor received a prompt discharge was unjustifiably delayed and complicated due to the debtor’s counsel whose “fundamental misunderstanding of the basic principles of bankruptcy law and key provisions of the Bankruptcy Code,” “good faith belief or opinion,” which supported every position he took in the case, and “ostrich-like” refusal to “acknowledge controlling law” led to the court’s issuance of an order to show cause pursuant to Federal Rule of Bankruptcy Procedure 9011. This mockery culminated with the court ordering the attorney’s (i) payment of $8,000 in fees to the court for his violation of Bankruptcy Rule 9011(b), (ii) disgorgement of $4,000 in attorney’s fees to the U.S. Trustee pursuant to section 329 of the Bankruptcy Code, and (iii) suspension from the practice of law in the bankruptcy courts for the Northern District of California until he has completed 24 hours of continuing legal education in bankruptcy law, three hours of continuing legal education in ethics, and ECF training.

Rule 9011 Sanctions

Bankruptcy courts commonly use the “frivolous” standard in Bankruptcy Rule 9011 to determine whether an attorney’s conduct warrants the imposition of sanctions. The standard for frivolousness is an objective one. An attorney’s conduct is measured against a reasonableness standard, which consists of a competent attorney admitted to practice before the presiding court. Accordingly, attorneys have a duty to make a reasonable inquiry into both the facts and the law relevant to their case. Shocking, right?!

Disgorgement under Section 329

Pursuant to section 329(a), an attorney representing a debtor in a bankruptcy case is required to file a statement regarding the compensation for the attorney’s services. Section 329(b) provides that the court may cancel any such fee agreement or order the return of any payment, to the estate or the entity that made it, if the court finds the fees excessive.

Section 330 enunciates the standard by which courts are to determine whether attorney’s fees exceed the reasonable value of the services provided. In determining the amount of reasonable compensation, courts will consider the nature, extent and value of the services rendered, taking into account all relevant factors.

By now you’re probably dying to know what this attorney did to deserve such an intense slap on the wrist. Get ready. The parade of horribles is a lengthy one, and we’re only giving you the highlights. By the end of this post, you’ll at least have an idea of what may cross the line of frivolity and land you in Rule 9011(c) territory . . .

Frivolous: Taking the Position That a Debtor’s Sole Proprietorships Can Remain Open After Commencing a Chapter 7 Bankruptcy Case

Section 721 of the Bankruptcy Code provides that “[t]he court may authorize the trustee to operate the business of the debtor for a limited period, if such operation is in the best interest of the estate and consistent with the orderly liquidation of the estate.” Accordingly, only a chapter 7 trustee, and not the debtor himself, may operate a chapter 7 debtor’s business.

In Nakhuda, the attorney improperly advised the debtor that he could continue operating laundromats as sole proprietorships during his bankruptcy case. Prior to the section 341 meeting of creditors, the trustee advised the attorney that the debtor was required to close the businesses. The attorney disregarded this advisement and simply responded that the issue was not so “black and white.” By the time the meeting was held, the debtor still was operating the laundromats and using estate assets to do so. Not surprisingly, the trustee filed an application to cease the debtor’s operations and turn over non-exempt funds and records. The court promptly granted the application. Rather than doing the minimal research required to understand the limitations imposed by section 721, the attorney spent months attacking the turnover order and, in so doing, squandered an unreasonable amount of the court’s and trustee’s resources.

Frivolous: Claiming that a Debtor’s Non-Filing Spouse’s Share of Community Property Is Not Property of the Estate

Section 541(a) provides that the commencement of a bankruptcy case creates an estate comprised of (1) all legal or equitable interests of the debtor in property as of the commencement of the case, and (2) all interests of the debtor and the debtor’s spouse in community property as of the commencement of the case. All community property that is not yet divided by a state court at the time of a bankruptcy filing constitutes property of the debtor’s bankruptcy estate.

Despite the lack of ambiguity in section 541(a)(2), the attorney remained adamant that the value of the property the trustee sought to recover should be reduced by half, “based on his view” that the debtor’s spouse’s share of community property was not part of the bankruptcy estate. Bewildered, the court noted that “[a]t no point did [the attorney] address § 541(a)(2) or even appear to be aware of its existence.”

Frivolous: Claiming that a Debtor’s Account Receivable Is Exempt as Earnings Paid by an Employer

Pursuant to section 706.050 of the California Code of Civil Procedure, an individual debtor may exempt “disposable earnings” that are “subject to levy under an earnings withholding order.” Earnings withholding orders only are issued to employers, because, under section 706.011(b), “earnings” is defined as “compensation payable by an employer to an employee for personal services.”

The first several versions of the debtor’s schedules listed money owed by a company for which the debtor provided consultant services as an account receivable. The debtor even testified under oath at the 341 meeting and in his deposition that he was a consultant for and was issued a form 1099 by the company. Not until after the trustee sought information about the account receivable did the attorney amend the schedules in order to recharacterize the account receivable as “exemptible wages” under section 706.050. The court found this attempt to evade the trustee’s effort to collect the account receivable objectively unreasonable.

Frivolous: Claiming that a Debtor’s Bank Account Is Exempt as a “Tool of the Trade”

Under section 704.060(a)(1) of the California Code of Civil Procedure, tools, implements, instruments, and other personal property are exempt property to the extent that the aggregate equity therein does not exceed $7,625.00 and if they are reasonably necessary to and actually used by the individual debtor in the exercise of the trade, business, or profession by which the debtor earns a livelihood.

The attorney insisted that the debtor was entitled to claim as exempt funds held in a bank account because the funds were “tools of the debtor’s trade.” Almost comically, the court assumed the attorney’s interpretation was “based on the fact that the debtor ran a business and thus needed money.” The attorney’s claim that he had researched this issue (without citing any legal authority) was slapped down by the court – “[h]e offered nothing to support his position because there is nothing.”

Frivolous: Claiming that Exemptions Are Automatic Based Solely on the Values Asserted in the Debtor’s Schedules

Section 542(a) of the Bankruptcy Code provides that an entity in possession, custody or control of property that the trustee may use, sell, or lease, or that the debtor may exempt under section 522 of the Bankruptcy Code shall deliver to the trustee, and account for, such property, unless such property is of inconsequential value or benefit to the estate. The attorney interpreted the “inconsequential value” exception to mean that any asset listed on Schedule C was automatically removed from property of the estate, and, therefore, was not subject to turn over. Remarkably, the attorney was steadfast in his argument that the laundromats and certain cash were automatically removed from the debtor’s estate because they were listed on Schedule C as having inconsequential value. Further, the attorney argued that because these assets were automatically removed from the estate, the debtor was permitted to continue operating the businesses and using the money.

The court’s view in a nutshell: “These are patently incorrect views of the law which a moderate amount of uncomplicated research would have shown.”

Frivolous: Launching a Campaign to Remove a Trustee Based on Your Own Misunderstanding of the Basic Principles of Bankruptcy Law

The heading pretty much says it all, but, in case there is any ambiguity, an attorney’s attempt to remove a trustee because of the attorney’s stubborn refusal to acknowledge the fundamental rules governing a chapter 7 case likely will fall into the frivolous category.

The Take-Away

You may not have learned how to fake it ‘til you make it as a bankruptcy attorney, but we hope you at least know that frivolity is not the conduit. And, if that’s the case, then the Bankruptcy Court for the Northern District of California fulfilled the purpose of Rule 9011(c) when it laid the smack down on Mr. Nakhuda’s attorney.

]]>Keeping Up with the Joneses: Our Top Five Most Read Posts this Yearhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/keeping-up-with-the-joneses-our-top-five-most-read-posts-this-year/
Fri, 15 Aug 2014 17:45:27 +0000http://business-finance-restructuring.weil.com/?p=11196We know we’re competing with news on Puerto Rico, Detroit, Syria, Iraq and other lovely places to spend your summer holidays, and that the deluge of daily updates means that you just can’t manage to read all of those wonderful Bankruptcy Blog posts that hit your inbox every day. Fear […]

]]>We know we’re competing with news on Puerto Rico, Detroit, Syria, Iraq and other lovely places to spend your summer holidays, and that the deluge of daily updates means that you just can’t manage to read all of those wonderful Bankruptcy Blog posts that hit your inbox every day. Fear not: we’ve got your back.

We’ve tallied the thousands of page views that each of our blog posts have received over the past few months, and put together this top five list of Bankruptcy Blog articles that you might have missed, but everyone else read. Want to keep up with the Joneses? Here’s your chance.

Enjoy this Bankruptcy Beach Reading, and enjoy what’s left of the summer!

]]>Our “Must-Cite” Bankruptcy Caseshttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/our-must-cite-bankruptcy-cases/
Fri, 08 Aug 2014 13:02:46 +0000http://business-finance-restructuring.weil.com/?p=11150Contributed by Charles Persons August is that hot, humid time of the year when many professionals in the concrete jungles across this country decide to quietly slip away to more scenic locales (if you don’t believe us, try calling up your stockbroker right now… go ahead, we’ll wait). Unfortunately, fellow […]

August is that hot, humid time of the year when many professionals in the concrete jungles across this country decide to quietly slip away to more scenic locales (if you don’t believe us, try calling up your stockbroker right now… go ahead, we’ll wait). Unfortunately, fellow bankruptcy practitioner, the law waits for no one.

You know the drill. Just as you’re about to take off a little early to join your investment banker friends at the beach, an email arrives in your inbox. Congrats! You have been tasked with writing a memo about a bankruptcy topic you know next-to-nothing about. Oh, and did we mention it was due “yesterday”?

Have no fear, loyal reader—we’re here to help. We at the Weil Bankruptcy Blog have compiled our favorite “must-cite” cases—the sort of cases that no brief or motion on a particular issue should go without citing. The criteria were simple: If your emergency memo fails to cite to one particular case, will it come back with a note saying, “You missed something. TRY AGAIN!”? If so, then you’ve got a “must-cite” case. (By the way, it also sounds like you’ve got a jerk for a boss, with all this last-minute memo writing and mean post-it notes.)

Our “Must-Cite” Cases

(1) The best place to start looking for any substantive answer, of course, is the Bankruptcy Code itself. If you happen to get lucky, the answer may be right there in the words of the statute, but sometimes you just need to spell it out for opposing counsel anyway. As U.S. v. Ron Pair Enters. will tell you, a Bankruptcy Code statute means what it says, and it says what it means.

Key quote: “In this case it is also where the inquiry should end, for where, as here, the statute’s language is plain, the sole function of the courts is to enforce it according to its terms.”

(2) It turns out your client is demanding some, shall we say, “unusual” relief from the court, and the Bankruptcy Code lacks the plain language you were hoping to find. Sure, you can cite to section 105(a), but it looks a little lonely by itself on the page. What to do? Your answer may be a nod to Pepper v. Litton for the proposition that bankruptcy courts are courts of equity.

Key quote: “Consequently this Court has held that for many purposes courts of bankruptcy are essentially courts of equity, and their proceedings inherently proceedings in equity.”

(3) While you are here, you better make sure the bankruptcy court can even grant the relief your client wants. As a loyal Weil Bankruptcy Blog reader, it’s almost redundant to mention, but bankruptcy court jurisdiction over state law issues starts with Stern v. Marshall—at least until Wellness Int’l Network v. Sharif arrives to explain things a little better.

Key quote: “[B]ankruptcy courts may hear and enter final judgments in ‘core proceedings’ in a bankruptcy case. In non-core proceedings, the bankruptcy courts instead submit proposed findings of fact and conclusions of law to the district court, for that court’s review and issuance of final judgment.”

(4) Maybe all your client really needs is to settle some crazy dispute so it can move on in life. In re W.T. Grant Co. sets the standard for court approval (and fortunately, it’s not a tough bar to clear). Sure, the case is almost as old as the Bankruptcy Code itself, but it still resonates today across the circuits whenever a Rule 9019 motion is filed.

Key quote: “In undertaking an examination of the settlement, we emphasize that this responsibility of the bankruptcy judge, and ours upon review, is not to decide the numerous questions of law and fact raised by appellants but rather to canvass the issues and see whether the settlement falls below the lowest point in the range of reasonableness.”

(5) Another piece of advice—know your role. If you are looking to define the limits of a debtor in possession’s role and fiduciary duties, the Supreme Court’s Commodity Futures Trading Comm’n v. Weintraub is the place to start.

Key quote: “The trustee is accountable for all property received and has the duty to maximize the value of the estate.”

(6) By the way, the debtor can’t maximize the value of the estate until it knows what counts as property of the estate. To make that determination, look to another oldie but goodie from the Supreme Court, Butner v. U.S., which explains where your section 541 analysis should begin. Unfortunately, it also explains that you’re going to need to find another set of statutes.

Key quote: “Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding.”

(7) Maybe the reason this brief was due yesterday is because someone forgot to give your client notice there was a confirmation hearing in the first place. Do you represent the mysterious and terrifying “unknown creditor” who was bound by a publication notice? Start with Mullane v. Cent. Hanover Bank & Trust Co., the must-cite case for due process considerations (and the only case on our list that didn’t involve a financially-distressed entity).

Key quote: “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.”

(8) You’re reviewing the debtor’s plan, but you can’t figure out why the creditor you represent got stuck in a class all by its lonesome, when it seems to fit in perfectly well with another class. Are you looking for a chance to invoke a term named after the ever-popular former Massachusetts Governor Elbridge Gerry? Do you want your objection to conjure up images of Moses (or Charlton Heston) coming down off of Mount Sinai holding stone tablets? Look no further than Phoenix Mut. Life Ins. Co. v. Greystone III, J.V. for the one case that fulfills those needs.

Key quote: “Those courts did not, however, adhere to the one clear rule that emerges from otherwise muddled caselaw on § 1122 claims classification: thou shalt not classify similar claims differently in order to gerrymander an affirmative vote on a reorganization plan.”

(9) Is the debtor trying to play the “new value” card in its plan? Or maybe you just need to brush up on the basics of absolute priority before you figure out your real plan of attack. Either way, Bank of Am. Nat. Trust and Savings Assoc. v. 203 N. LaSalle St. P’ship is your “must-cite” case.

Key quote: “An old equity holder simply cannot take property under a plan if creditors are not paid in full.”

(10) So there’s no “new value” issue, but maybe you can go after the debtor’s plan on feasibility. The chapter 11 case of Johns-Manville, once the world’s largest miner of asbestos, gave us Kane v. Johns-Mansville Corp.., a 1988 Second Circuit decision that has been cited for feasibility issues in every circuit in the country. Plus, what is there not to appreciate about a bankruptcy case filed in 1982 that nonetheless spawned (yet another) Second Circuit opinion as recently as two weeks ago?

Key quote: “Subsection 1129(a)(11) requires that the plan is not likely to be followed by liquidation or the need for further financial reorganization. As the Bankruptcy Court correctly stated, the feasibility standard is whether the plan offers a reasonable assurance of success. Success need not be guaranteed.”

Faithful readers, we know we could have doubled this list easily, but we want to hear from you. What are the cases that you use over and over—the ones that you consider “must-cites?” Click hereto give us your suggestions, and we will update the list at the end of the summer just before everybody gets back to business.

]]>Highlights From 2014 (and Beyond)https://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-highlights-from-2014-and-beyond/
Fri, 18 Jul 2014 15:48:20 +0000http://business-finance-restructuring.weil.com/?p=11021Contributed by Doron P. Kenter. It’s a beautiful day for the beach. Even though some of us may be at the beach today (and if you are at the beach, why didn’t you invite us?), bankruptcy, like time, waits for no one. Wherever we happen to be, ‘tis the season […]

It’s a beautiful day for the beach. Even though some of us may be at the beach today (and if you are at the beach, why didn’t you invite us?), bankruptcy, like time, waits for no one. Wherever we happen to be, ‘tis the season for a little something light – or at least lighthearted. In the spirit of summer Fridays, we wanted to take the opportunity to bring you some of the colorful quotes that we’ve come across in bankruptcy decisions over the past few months. And for those of you who crave more: worry not – we’ll keep combing our records in efforts to bring you further installations of Bankruptcy Beach Reading as we continue to geek out over hidden gems like these!

Boy the apple doesn’t fall very far from the tree does it. You are such a lying piece of * * * *. Nobody at that table believed a word you said today. You should have had your lying piece of * * * mother coach you before you went to court. She’s a much better liar, or I should say perjurer than you are, but she had more practice also. They are not done with you. Marsha is watching both of you closely.”

Postscript: The court concluded that the text message did not constitute an attempt to collect on a debt. “Name calling, in and of itself, does not constitute debt collection as is required for a willful stay violation. . . .” The court, however, noted that the creditor “should be admonished to cease all contact with the Debtors in regard to the debt at issue.”

In this case, a creditor seeking to repossess certain property reportedly told the debtor, “F* * * the stay, I want my equipment. If you can’t handle that go work someplace else. You work for me.”

Postscript: The court, unconvinced by the defendant’s arguments that its principal was unfamiliar with bankruptcy law, finding that “a business that is involved with repossessions should be familiar enough with bankruptcy to know it should seek this Court’s assistance to obtain relief from the automatic stay, especially when served with multiple notices of the bankruptcy filing.”

Attorneys for a creditor sought to except the creditor’s debt from the debtor’s discharge. Sounds fine so far. But unfortunately, the attorney filed on paper, rather than electronically – as the court’s rules required. The judge, invoking early N.Y. Mets manager Casey Stengel, exasperatedly asked “[c]an’t anybody here play this game?” For what it’s worth, we note that some of us may be saying the same thing about more recent Mets teams. . . .

The court invoked Kafka (and the word “Kafka-esque) in describing the tension-fraught relationship between the debtor and its former attorney. In the court’s words:

Ateco’s odyssey has instead come to look more like Joseph K.’s strange trip through the legal system in Franz Kafka’s The Trial rather than any appropriate dispute resolution in the American justice system. Just as Joseph K. never really knew why he had been arrested, Ateco has been incapable of resolving a simple fee dispute for almost 10 years.

. . .

Petrovsky attempted to get explanations from Hebb about the bills and what Hebb was doing on the case. Hebb never seemed to realize that Ateco was his client and deserved a detailed billing on a regular basis without all sorts of strange abbreviations and entries making no sense. Petrovsky seemed legitimately puzzled why Hebb still did not understand his concerns after all these years. He had once had a professional relationship with Hebb and tried not to insult him, but the more he tried to gracefully remove Hebb from work on the case, the more Kafkaesque the proceedings became with Hebb chasing him. In The Trial, Joseph K told the police supervisor arraigning him for some unknown charge, “I require a clear answer to all these questions, and I’m quite sure that once things have been made clear we can take our leave of each other on the best of terms.” Franz Kafka,The Trial (David Wylie trans., Project Gutenberg eBook 2003) (1925). Petrovsky, likewise, was in search of simple answers on what fees were appropriate or how the case was going. . . .

The plaintiff sued the debtors (his half-sister and brother-in-law, respectively) to except from their discharge a debt incurred as a result of their having spent “every dime” of his money while he was in prison, including the purchase of a BMW, a Porsche, a pool table, and tickets for a cruise. In framing the issues before it, the court observed:

One of my former law partners, an estate planning lawyer by specialty, once told me, “If you want to know the strength of family ties, drop a bucketful of money between them and watch what happens.” Put another way, blood may be thicker than water, but it is often no match for the almighty dollar. As one of the great vaudevillians of the twentieth century was fond of saying, and as this case so aptly illustrates, “ain’t it the truth!”

(citing Ronald Jensen and Jimmy Durante, respectively). Of course, we at the Bankruptcy Blog are suckers for anything Durante. Indeed, given the subject matter of this Blog, we can’t resist sharing this classic advice from the Schnoz: “Be awful nice to ‘em goin’ up, because you’re gonna meet ‘em all comin’ down.”

Even though a creditor was adversely affected by the debtor’s bankruptcy filing, the court concluded that the debtor had shown no bad faith in commencing a chapter 11 case. Indeed, as Judge Posner noted, “[i]t is not bad faith to seek to gain an advantage from declaring bankruptcy—why else would one declare it?”

[Kudos to Robert Miller for submitting this one via our March Madness competition!]

The court observed that “[t]he FDIC’s circular reasoning ignores eight centuries of legal history.” We will not attempt to articulate the arguments (or the merits of those arguments here). But we’ll simply let the Fifth Circuit Court of Appeals speak for itself:

To be sure, in medieval England, a landlord had no right to enforce the covenants in a lease against an assignee of the original tenant: courts reasoned that while the original tenant remained contractually liable for his obligations under the lease ( e.g., rent), there was no enforceable contract running between the landlord and the assignee. However, as noted in the original Restatement of Property, “the inconveniences resulting from such a rule [were] manifest,” preventing both the landlord and the ultimate tenant from relying on covenants in the original lease. Hence, English courts developed the concept of “real covenants,” a concept that has carried over into American law and the laws of Texas. Real covenants are covenants that “run with the land” and can be enforced by the landlord against an assignee tenant by virtue of their “privity of estate”— notwithstanding the absence of contractual privity. However, the content of the conveyance by the original tenant to the subsequent tenant remains critical, as the subsequent tenant only comes into “privity of estate” with the landlord if the landlord can prove that the original tenant assigned away his entire interest in the lease (as opposed to a lesser-included portion, i.e., a “sublease”). The FDIC’s position, under which the landlord lacks “standing” to prove the content and effect of the conveyance between the tenants because he is not a party to the conveyance, would defeat the concept of real covenants, returning our law to that of twelfth-century England.

]]>To celebrate the one event that affects workplace productivity worldwide, we bring you our World Cup edition of Weil’s Bankruptcy Beach (or, in this case, multitasking while sitting in front of a screen for eight hours) Reading. This week, our Bankruptcy Beach Reading series brings you bankruptcy trivia, with each question relating to one or more countries competing in the 2014 World Cup (even if, as of today, that country has been eliminated from advancing to the Group of 16). Don’t worry if you are one of the few people on the planet who knows nothing about the World Cup or futbol — for the most part, your knowledge of world bankruptcy events should pull you through this challenge. Click on the links to see the answers and find out how many goals you scored.

1. Which bankruptcy judge shares a last name (and a city) with the MLS’s all-time top scorer? (OK — this one requires just a tiny bit of soccer knowledge. For an easier version of the question, click here.)

1. Answer

2. What controversial element of Mexican debtor Vitro SAB de CV’s plan led courts in the United States to deny enforcement of the plan in chapter 15?

(a) Nonconsensual third-party releases

(b) Cramdown without an impaired accepting class

(c) Equitable mootness on appeal

(d) Distribution of prepayment premium to undersecured creditor

2. Answer

3. A group of investors from this country owned a New York chocolate company (that also operated a plant in Fulton, NY that Nestlé had once owned and operated for over 100 years) that filed for chapter 11 in 2010. The filing was precipitated, in part, when the President of this country dissolved the country’s government. What was the country, and what was the name of the company?

3. Answer

4. What country’s central bank was one of the creditors that forced Drexel Burnham Lambert Group’s commodities trading subsidiary into an involuntary chapter 7 (which was later converted to chapter 11) in 1990?

4. Answer

5. A virtual currency exchange company became the first bitcoin entity to seek chapter 15 protection in February. In what country was the foreign main proceeding pending, and what was the name of the company?

5. Answer

6. What company was the first company for which the Italian government wrote special legislation that enabled the company to restructure in an Italian “bankruptcy” proceeding?

6. Answer

7. In this case, the bankruptcy court refused to recognize orders of German and English courts that would have given an insolvency administrator a “wiretap” on email sent to a debtor in a German insolvency proceeding, who had hidden assets and fled the country. What was the case, and what was the debtor’s occupation?

7. Answer

8. In 2012, this country’s president declared the country’s flagship airline carrier bankrupt and grounded the carrier’s aircraft. Name the country and the airline.

8. Answer

9. Ralph Sweet was the vice chair, shareholder, and manager of a professional soccer club from this country and also a shareholder, officer, director, and manager of this defunct debtor American soccer franchise.

9. Answer

10. Almost as famous now for Sofia Vergara as it is for Juan Valdez, the latter was a major shareholder in this country’s flagship airline, Avianca, which successfully reorganized itself through a chapter 11 case in 2004, many years before chapter 15 became a statutory option.

10. Answer

11. A massive oil company based in this country was famously thwarted in its attempt to use chapter 11 when the U.S. Bankruptcy Court for the Southern District of Texas dismissed the case based on the company’s limited ties to the United States. Name the company and the country.

11 Answer

12. A large electronics manufacturer from this country launched an automobile line just before a financial crisis gripped the region forcing it to eventually put the automotive business into bankruptcy and sell it to an automotive giant from another World Cup country. The company’s cars are still sold today, but only in one country, yet another World Cup country. Name the manufacturer and its country, the automotive giant and its country, and the country in which which cars are still sold today.

]]>BANKRUPTCY BEACH READINGhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-3/
Fri, 23 May 2014 15:50:57 +0000http://business-finance-restructuring.weil.com/?p=10621As we head into the Memorial Day weekend, Weil’s Bankruptcy Blog is re-launching its Bankruptcy Beach Reading series. Throughout the summer, we will publish on random Fridays some lighter suggestions for weekend reading. For our first installment this season, we simply have reprinted the text of a decision from Canada […]

]]>As we head into the Memorial Day weekend, Weil’s Bankruptcy Blog is re-launching its Bankruptcy Beach Reading series. Throughout the summer, we will publish on random Fridays some lighter suggestions for weekend reading. For our first installment this season, we simply have reprinted the text of a decision from Canada that has absolutely nothing to do with bankruptcy (or even the CCAA). It is more of an object lesson on how to be a good neighbor (or not), whether at your beach house, apartment, or suburban home. And, although it does refer to a New York decision on whether a cause of action exists to recover damages for emotional distress due to the death of a family pet, it also shows that litigiousness is not limited to residents of Canada’s neighbors to the south.

[1] The parties to this action live across the road from each other in Toronto’s tony Forest Hill neighbourhood. The video footage played at the hearing shows that both families live in stately houses on a well-manicured, picturesque street. They have numerous high end automobiles parked outside their homes.

[2] The Plaintiff, John Morland-Jones, is an oil company executive; the Defendant, Gary Taerk, is a psychiatrist. They do not seem to like each other, and neither do their respective spouses, the Plaintiff, Paris Morland-Jones and the Defendant, Audrey Taerk.

[3] In this motion, the Plaintiffs seek various forms of injunctive relief on an interlocutory basis. It all flows from the Plaintiffs’ allegation that the Defendants have been misbehaving and disturbing their peaceful life in this leafy corner of paradise.

[4] As counsel for the Plaintiffs explains it, the Plaintiffs’ house is ringed with eleven video cameras for security purposes. Two of them are aimed directly at the Defendants’ front door and driveway. They record, 24/7/365, every movement in and out of the Defendants’ home. The Plaintiffs can see when Ms. Taerk leaves to go shopping, they can study what the Defendants are wearing every morning when they pick up their newspaper on the front step, they have a videotaped record of when Mr. Taerk goes to work or walks his dog, etc.

[5] Nothing that the Defendants do escapes the Plaintiffs’ video camera lens. The cameras trained on the Defendants’ house may or may not provide the Plaintiffs with a sense of security, but as demonstrated by the dozen or so videos produced in this motion, the Plaintiff’s “security system” is as much a sword as it is a shield.

[6] The hearing before me started off with counsel for the Plaintiffs playing a short excerpt from security footage shot by the Plaintiffs several years ago, in which Ms. Taerk is seen performing a “poop and scoop” after a dog did its business on her front lawn. The Plaintiffs’ security camera shows her crossing the street with the plastic bag-full in hand, and then walking toward the Plaintiffs’ driveway where the garbage cans were out for collection. Although the impugned deed actually takes place off camera, Ms. Taerk can be seen moments later returning to her side of the street empty-handed.

[7] Apparently, much to the consternation of the Plaintiffs, she deposited the goods in the Plaintiffs’ garbage can. In doing so, she failed to walk to the back of her house to place it in her own receptacle like a truly good neighbour would do.

[8] The “dog feces incident”, as counsel for the Plaintiffs calls it, is a high point of this claim. At the hearing, it was followed by counsel’s description of a cease and desist letter sent to the Defendants in 2008 by a lawyer then representing the Plaintiffs, which describes what is now referred to by counsel as the “dog urination issue”. This letter enclosed photographs – apparently stills taken from the Plaintiffs’ non-stop video footage – documenting Mr. Taerk walking his dog and occasionally allowing it to lift its leg in a canine way next to the bushes lining the Plaintiffs’ lawn.

[9] The Defendants did not respond to this erudite piece of legal correspondence. Counsel for the Plaintiffs characterizes this silence as an “admission”, although it is unclear just what legal wrong was being admitted to.

[10] And it goes downhill from there. For example, the Defendants are accused of occasionally parking one of their cars on the street in a legal parking spot in front of the Plaintiff’s home. The Defendants do this now and then, according to the Plaintiffs, just to annoy them. This accusation was admittedly pressed rather sheepishly by Plaintiffs’ counsel, since the Plaintiffs have conceded that they park one of their own cars in front of the Defendants’ home every day. Indeed, the Plaintiffs cannot help but concede that fact, since their own non-stop video surveillance of the Defendant’s house shows the Plaintiff’s car sitting there day after day.

[11] The Plaintiffs also complain quite vociferously about the fact that the Defendants – in particular Ms. Taerk – are in the habit of sometimes standing in their own driveway and taking cell phone pictures of the Plaintiffs’ house across the street. Apparently, the Plaintiffs, who keep two video cameras trained on the Defendants’ house night and day, do not like their own house being the target of Ms. Taerk’s occasional point-and-click.

[12] The Plaintiffs also accuse Ms. Taerk of taking pictures of the Plaintiffs’ housekeeper taking their dog for its daily constitutional. The video tapes show the housekeeper leading the dog to what they describe as its favorite grassy spot in a parkette only feet from the Defendants’ front lawn. The housekeeper has deposed that she goes there with the dog every day. Ms. Taerk has made of show of documenting that activity.

[13] Another complaint submitted by the Plaintiffs is that Mr. Taerk has taken up the habit of walking by their house with a voice recorder in hand, trying to catch some of the verbal exchanges between the parties. According to Mr. Taerk’s affidavit, Ms. Morland-Jones occasionally shouts profanity or other insults at him when he is on his walks, so he now only ventures onto the road armed with his dictaphone. He tends to hold it at the ready in his right hand as he walks rather than holstering it on his hip.

[14] The controversy has even extended to other lucky residents. The Plaintiffs summoned under Rule 39.03 no less than four of their neighbours to testify on the pending motion, no doubt endearing themselves to all of them. One witness, a lawyer, was asked to confirm that he had warned the Plaintiffs about the Defendants when they first moved into the neighbourhood; he responded that can recall saying no such thing. Another witness, a professor, was asked to confirm that she sold her house for below market value just to get away from the Defendants; she said she did not.

[15] Each of the summonsed witnesses was asked by Plaintiffs’ counsel to confirm the affidavit evidence sworn by Mr. Morland-Jones that the Defendants are difficult people. None of them seemed to want to do that, although one of them did recount that the Defendants had objected to a renovation permit that the Plaintiffs once sought, and that the matter had proceeded to the Ontario Municipal Board. Another of the neighbours was asked to recount the rude nicknames that some neighbourhood children had given Ms. Taerk when she was a substitute teacher at a nearby school.

[16] In what is perhaps the piece de resistance of the claim, the Plaintiffs allege that the Defendants – again focusing primarily on Ms. Taerk – sometimes stand in their own driveway or elsewhere on their property and look at the Plaintiffs’ house. One of the video exhibits shows Ms. Taerk doing just that, casting her gaze from her own property across the street and resting her eyes on the Plaintiffs’ abode for a full 25 seconds. There is no denying that Ms. Taerk is guilty as charged. The camera doesn’t lie.

[17] For their part, the Defendants have not been entirely innocent. They appear to have learned that the Plaintiffs – and especially Ms. Morland-Jones – have certain sensitivities, and they seem to relish playing on those sensitivities. They realize, for example, that Ms. Morland-Jones does not enjoy having her house photographed, and so Ms. Taerk tends to take her cell phone out and point it at the Plaintiffs’ house precisely when Ms. Morland-Jones can see her doing it.

[18] Ms. Taerk has testified that, in fact, she has not taken any pictures but rather has been pretending to do so by simply pointing her phone and clicking it randomly. Ms. Taerk presents this as a justification for not producing any photographs in the evidentiary record, but of course the explanation reflects more malevolence than what it attempts to excuse. In any case, Ms. Morland-Jones can be counted on to respond as predicted. It is a repeated form of hijinks that could, if a sponsor were found, be broadcast and screened weekly, although probably limited to the cable channels high up in the 300’s.

[19] The same is true with Mr. Taerk’s voice recording technique. Although Mr. Taerk may have started carrying this device in order to record Ms. Morland-Jones’ spontaneous eruptions, cause and effect have now been reversed. Mr. Taerk appears to enjoy walking by the Plaintiffs’ residence with his dictaphone conspicuously raised to shoulder level when he sees Ms. Morland-Jones in her garden, which then prompts the very outbursts that he was at first reacting to. On one of the tapes, Ms. Taerk can actually be heard prompting Mr. Taerk to go out and goad Ms. Morland-Jones in this fashion.

[20] The Plaintiffs’ teenage son has testified that when he was 10 years old, Ms. Taerk instructed him to stay off the public parkette adjacent to her home, saying that it belongs to the Defendants. He also deposed that when he was 16 the Defendants appeared to be photographing him one day as he sat in a parked car in front of his house – or, more accurately, just across from the Defendants’ house – with his girlfriend. He speculated, but could not entirely recall, precisely what he and the young woman were doing in the car at that moment.

[21] The antics have only gotten worse since then. Ms. Morland-Jones has shouted at the Taerks from her front yard, and Ms. Taerk has given Ms. Morland-Jones “the finger” from her front driveway. The Defendants have apparently called the police on the Plaintiffs numerous times in recent years; the Plaintiffs have responded by retaining a criminal lawyer to attempt to have a peace bond issued that would restrict the Defendants’ movements. All of that has been to no avail.

[22] Now the Plaintiffs have pursued civil litigation. To their credit, or perhaps to the credit of their counsel who has advised them well in this regard, the Defendants have not counterclaimed. Having acted provocatively to egg the Plaintiffs on and to prompt this gem of a lawsuit, the Defendants did not need to bring any claim themselves. The Plaintiffs have been their own worst adversaries.

[23] In my view, the parties do not need a judge; what they need is a rather stern kindergarten teacher. I say this with the greatest of respect, as both the Plaintiffs and the Defendants are educated professionals who are successful in their work lives and are otherwise productive members of the community. Despite their many advantages in life, however, they are acting like children. And now that the matter has taken up an entire day in what is already a crowded motions court, they are doing so at the taxpayer’s expense.

[24] As I explained to Plaintiffs’ counsel at the hearing, a court cannot order the Defendants to be nice to the Plaintiffs. Litigation must focus on legal wrongs and legal rights – commodities which are in remarkably short supply in this action. As my colleague Perell J. put it in High Parklane Consulting Inc. v Royal Group Technologies Ltd., [2007] OJ No 107 (SCJ), at para 36, “[i]t is trite to say that making a living is a stressful activity and that much of life can be nasty and brutish. Tort law does not provide compensation for all stress-causing and nasty conduct that individuals may suffer at the hands of another…”

[25] I cannot help but comment that the courts as public institutions are already bursting at the seams with all manner of claims. To add to that public burden the type of exchanges that these parties have engaged in would be to let the litigious society stray without a leash – or perhaps without a lis. I note the observation made to this effect by the Supreme Court of New York in Johnson v Douglas, 734 NYS 2d 847, 187 Misc 2d 509, at 510 (2001):

Although we live in a particularly litigious society, the court is not about to recognize a tortious cause of action to recover for emotional distress due to the death of a family pet. Such an expansion of the law would place an unnecessary burden on the ever burgeoning case loads of the court in resolving serious tort claims for injuries to individuals.

[26] What is true regarding the death of a family pet is certainly true regarding the scatology of a family pet. There is no claim for pooping and scooping into the neighbour’s garbage can, and there is no claim for letting Rover water the neighbour’s hedge. Likewise, there is no claim for looking at the neighbour’s pretty house, parking a car legally but with malintent, engaging in faux photography on a public street, raising objections at a municipal hearing, walking on the sidewalk with dictaphone in hand, or just plain thinking badly of a person who lives nearby.

[27] There is no serious issue to be tried in this action. The Plaintiff’s motion is therefore dismissed.

]]>BANKRUPTCY BEACH READING: Reality Bites: The Behind-the-Scenes Bankruptcy Lifestyles of the (Perhaps Not So) Rich and Famoushttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-reality-bites-the-behind-the-scenes-bankruptcy-lifestyles-of-the-perhaps-not-so-rich-and-famous/
Fri, 29 Jun 2012 14:00:38 +0000http://business-finance-restructuring.weil.com/?p=6388Contributed by Elisa Lemmer For most of us, summer is a welcome reprieve from the hustle and bustle of the rest of the year. Summer affords us the opportunity to host barbeques, swim in the ocean, attend a baseball game or two, and watch a healthy dose of reality TV. […]

For most of us, summer is a welcome reprieve from the hustle and bustle of the rest of the year. Summer affords us the opportunity to host barbeques, swim in the ocean, attend a baseball game or two, and watch a healthy dose of reality TV. While most of the year-round television shows are on hiatus, many television networks seize the opportunity to showcase “real life” – such as fraudulent transfer actions, chapter 7 bankruptcy filings, and bankruptcy auctions of personal of personal property. That doesn’t sound like the plots of the reality television shows you watch? In this installment of Reality Bites, we take a look at what’s going on behind the scenes in the (bankrupt) lives of some of the women who appear in various franchises of Bravo’s Real Housewives.

Sour Grapes

One of the most infamous of the Real Housewives is Michaele Salahi. She, along with her husband, Tareq Salahi, crashed a White House party hosted by President Obama in the “party crash” watched round-the-nation – originally televised by the mainstream news media and later on the now-canceled Real Housewives of D.C. It seemed that the White House crash was only the icing on the cake of the Salahis’ woes. Though portrayed as members of D.C.’s elite, the Salahis’ wining and dining days did not last very long. Their wine company, Oasis Vineyard, Inc., filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Eastern District of Virginia in late 2008. After the debtor failed to file timely monthly operating reports, the United States Trustee requested that the case be converted to chapter 7. The sparkly bankruptcy fizzled out last year with an asset sale conducted by Oasis’s chapter 7 trustee. The assets sold included various relatively mundane items such as tables, chairs and kitchenware, as well as cases of “Oasis Brute Sparkling Wine” which sold for $2.00 each. Perhaps if the Salahis had personally autographed the bottles the bankruptcy auction would have been more lucrative, but they didn’t and, ultimately, the debtor’s estate received only approximately $116,000 in sales proceeds. Sour grapes, indeed.

Losing Their Shirts?

The Salahis’ vineyard’s financial woes are not the only newsworthy drama currently plaguing the ’wives. Some members of the Garden State’s Real Housewives of New Jersey also have found their way to the halls of the bankruptcy courts. Although the recent personal bankruptcy cases of Teresa Guidice and her husband, “Juicy” Joe Guidice, have been the subject of much tabloid fodder, more timid housewife, Jacquelyn Laurita, is also no stranger to the bankruptcy world. Jacquelyn and her husband Chris are currently defendants in an adversary proceeding pending before Judge Peck in the United States Bankruptcy Court for the Southern District of New York in the chapter 11 case of Signature Apparel Group LLC, a clothing design and manufacturing company founded by Jacquelyn’s husband and brother-in-law. Although the order confirming the chapter 11 plan of Signature Apparel was entered in June of 2010, the suit against the Laurita family members still continues, and the allegations are juicier than the table flipping and hair pulling drama televised on the show. The complaint asserts causes of action for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, conversion, fraudulent transfer, and unjust enrichment, among others. It alleges improper payments made to fund at least $1.9 million in credit card payments for Jacquelyn and other members of her family, as well as private airplane rentals and other travel expenses. The suit also alleges that funds were diverted from the debtor to make payments on at least 11 leased luxury cars. Though filed two years ago, the adversary proceeding is progressing slowly, so we cannot yet know whether the court will find that any of the allegations made against the Lauritas have merit or whether a judgment against the Lauritas will cause them to “lose their shirts.” Stay tuned.

“Reel”Life

As we are learning by a review of bankruptcy dockets around the country, life on reality television is not always picture perfect. Ostensibly occasioned by a $7 million judgment obtained by movie studio Hannibal Pictures, Inc. against her, Real Housewife of New York and self-proclaimed socialite Sonja Tremont-Morgan sought chapter 11 protection in 2010 in the United States Bankruptcy Court for the Southern District of New York. Although many socialites find their personal and financial lives gracing page 6 of the New York Post, Sonja’s “secrets” have been showcased, instead, in a different outlet – Judge Chapman’s bankruptcy docket. From the pleadings and transcripts of hearings before the court, it appears Sonja’s drama-filled life follows her onscreen and off-screen. She unsuccessfully sued her former counsel for malpractice in connection with the Hannibal litigation and since then, her former counsel is attempting to collect its attorneys’ fees from her. On another front, Sonja continues to fight for access to property she owns in France that she allegedly won in a divorce settlement with her ex-husband, John A. Morgan (who, incidentally, is rumored to be a descendant of the famous J.P. Morgan and who, according to a court transcript, is approximately 82 years old and still competent – though he did suffer a traumatic brain injury in a car accident). She even went so far as to file a motion under section 362 of the Bankruptcy Code seeking to “punish” Mr. Morgan unless he provides her with access to the French property. Sonja is standing her ground. Meanwhile, keeping its name in the limelight, Hannibal Pictures has filed its own disclosure statement in Sonja’s bankruptcy case in which it discloses, among other things, its views of how exactly Sonja’s assets should be distributed to her creditors. Like Jacquelyn Laurita’s adversary proceeding, we still don’t know how this particular movie ends, but from the looks of it, it appears that docket watchers will be in for quite a show.

Have a great weekend, and keep watching the dockets for a real dose of “reality” TV.

]]>BANKRUPTCY BEACH READING: Our Second Bankruptcy Trivia Contesthttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-our-second-bankruptcy-trivia-contest/
Fri, 02 Sep 2011 14:15:27 +0000http://business-finance-restructuring.weil.com/?p=3493Think of the last entry in our summer 2011 Bankruptcy Beach Reading series as a combined beach reading/back to school special. Let someone else do all the work closing up your summer house while you test your wits in our second bankruptcy trivia contest. For this contest, we have upped the […]

]]>Think of the last entry in our summer 2011 Bankruptcy Beach Reading series as a combined beach reading/back to school special. Let someone else do all the work closing up your summer house while you test your wits in our second bankruptcy trivia contest.

For this contest, we have upped the stakes for everyone participating in the contest — not only will you be eligible to win the complete Weil back to school collection if your entry is chosen at random among those with the most correct answers, but you will also help support inMotion, a New York City charity that provides free legal services to battered women and their children. For each of the first 50 responses that answer at least eight questions correctly, Weil will donate $25 to inMotion’s second annual Story by Story event on October 6. On that date, Weil, together with other members of the restructuring community and supporters of inMotion, will climb the stairs of 1411 Broadway, a 42-story skyscraper in the heart of New York’s Fashion District and Times Square, to help inMotion put an end to domestic violence.

If you want to participate in the contest, submit your answers to the trivia questions below no later than 5 pm on Wednesday, September 7.

And, if you want to help support inMotion by contributing to Weil’s stair climbing, please click here

]]> BANKRUPTCY BEACH READINGhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-2/
Fri, 12 Aug 2011 14:12:11 +0000http://business-finance-restructuring.weil.com/?p=3226Looking forward to the beach, but dreading the long train ride to Montauk? The Weil Bankruptcy Blog has got just the thing to keep you company. For this week’s edition of Bankruptcy Beach Reading we put together a list of our favorite bankruptcy related books. With titles ranging from non-fiction […]

]]>Looking forward to the beach, but dreading the long train ride to Montauk? The Weil Bankruptcy Blog has got just the thing to keep you company. For this week’s edition of Bankruptcy Beach Reading we put together a list of our favorite bankruptcy related books. With titles ranging from non-fiction to murder mystery, you can sit back, relax, and enjoy the ride. After all, nothing makes time fly like a good bankruptcy read.

Non-Fiction

Conspiracy of Fools, by Kurt Eichenwald
An in-depth look at the collapse of Enron.

Dance with Chance: Harnessing the Power of Luck, by Spyros Makridakis
A book about what we can and cannot predict (the stock market) and how to embrace luck in our lives.

Debt’s Dominion, by David Skeel
An account of the history and uniqueness of American bankruptcy.

Distressed Investment Banking – To the Abyss and Back, by Henry F. Owsley and Peter S. Kaufman
An explanation of how investment bankers assist distressed companies.

Fool’s Gold, by Gillian Tett
A good account of the expansion of the derivatives market and the subprime mortgage crisis.

House of Morgan, by Ron Chernow
The story of J.P. Morgan’s (the person) rise from obscurity to empire builder.

Lombard Street: A Description of the Money Market, by Walter Bagehot
This 19th century classic puts the world of international and corporate finance, banking, and money in plain language.

Our Lot: How Real Estate Came to Own Us, by Alyssa Katz
The story of how people’s homes came to own them during the housing bubble.

Predator’s Ball, by Connie Bruck
An inside look at the fall of Drexel Burnham.

Republic of Debtors, by Bruce Mann
A Supreme Court Justice is in debtor’s prison. The richest man in America is on the run from creditors. Read about these and other factors that led to the Bankruptcy Act of 1800.

Smartest Guys in the Room, by Bethany McLean and Peter Elkind
Unlike Eichenwald’s blunt title, McLean and Elkind prefer a more tongue in cheek title for their book chronicling the demise of Enron.

Sweetness and Power: The Place of Sugar in Modern History, by Sidney W. Mintz
The story of how sugar has helped shape history. After reading it, you may consider investing in sugar instead of gold.

The Big Short, by Michael Lewis
A story about the fortunes some people made by betting against the market before its collapse in 2008.

The Great Crash of 1929, by John Kenneth Galbraith
An investigation of the factors that led to the market crash of 1929. Do any ring a bell?

The Vulture Investors, by Hillary Rosenberg
Tells the story of some of the largest bankruptcies in history and the arbiters who profited from them.

When Genius Fails: The Rise and Fall of Long Term Capital, by Roger Lowenstein
Predators and Geniuses, didn’t we do this already with the Smart Guys and Fools with the Enron books? In Genius Fails, Lowenstein looks at what went wrong at Drexel Burnham.

Fiction

Bleak House, by Charles Dickens
With shortened exclusivity, this would never happen in bankruptcy, would it?

Little Dorritt, by Charles Dickens
Dickens’s famous novel about the Marshalsea debtor’s prison.

The Last Billable Hour, by Susan Wolfe
While not bankruptcy-related, it is real beach reading – a quick-read mystery that can take your mind off of the stock markets and the debt wall. Not to mention that a lawyer saves the day.

The White Tiger, by Aravind Adiga
A story of capitalism arriving in India through the eyes of a chauffeur. This book has a little of everything: a rags to riches story; revenge; murder; and, of course, debt.

]]> BANKRUPTCY BEACH READING Bankruptcy Trivia–Answers Revealedhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-bankruptcy-trivia-answers-revealed/
Fri, 05 Aug 2011 13:43:18 +0000http://business-finance-restructuring.weil.com/?p=3155Thanks to all of you who participated in our first ever Bankruptcy Trivia contest. Although no one sent us an entry with 100% completely correct answers, we did select at random one lucky respondent to receive the complete Weil bankruptcy nerd swag package. (To protect that person from any suggestion […]

]]>Thanks to all of you who participated in our first ever Bankruptcy Trivia contest. Although no one sent us an entry with 100% completely correct answers, we did select at random one lucky respondent to receive the complete Weil bankruptcy nerd swag package. (To protect that person from any suggestion of loafing off and spending time finding answers to the trivia, we will not release his or her name, but we can say that Weil employees were not eligible to win.)

Q. What is the only sports franchise to file for bankruptcy twice?

A. The Pittsburgh Penguins filed for bankruptcy protection in 1975 after the IRS seized their assets for failure to pay taxes. The Penguins had approximately $6.5 million in debts at the time of the filing, including $500,000 owed to the IRS. 23 years later, in 1998, the Penguins filed for chapter 11 protection. Upon emergence from their second bankruptcy, they were controlled by Mario Lemieux, who converted the approximately $30 million he was owed in deferred salary into equity in the franchise.

Q. After a certain grace period, early Roman law (i.e., the Twelve Tables circa 450 B.C.) gave a creditor the choice of selling a debtor into slavery or killing him. Regarding the latter remedy, what would happen if the debtor had more than one creditor?

A. If a debtor in ancient Rome had more than one creditor, the debtor’s body would be cut into proportionate shares for each creditor.

Q. What famous jurist is most often credited for coining the phrase “indubitable equivalence”?

Q: Who is officially considered the most litigious person in the world? Not only did this man sue the Guinness Book of World Records for naming him as such, he has also made appearances in numerous large debtor cases, including, in no particular order, General Motors, Philadelphia Newspapers, Chrysler, Pilgrim’s Pride, and Bernard L. Madoff Investment Securities. This man is also famously known for naming in a single complaint, among others: George Bush, along with his entire administration and various family members; the authors of the Uniform Commercial Code; the Pope; Jimmy Hoffa; the Magna Carta; the Taliban; Brad Pitt and his adopted son Maddox; the Nordic Gods; Fabio; and Fidel Castro.

A. Jonathan Lee Riches is a prisoner who is said to have filed more than 1,000 lawsuits in federal district courts.

Q: What provision of the Bankruptcy Code explicitly requires the bankruptcy court to consider the public interest in addition to the interests of the debtor, creditors, and equity interest holders in certain chapter 11 cases?

A. We had in mind section 1165, the provision under the Railroad Reorganization subchapter that directs the court and the trustee “to consider the public interest in addition to the interests of the debtor, creditors, and equity security holders” in applying certain sections of the subchapter. One respondent, though, pointed out that section 1129(a)(5)(A)(ii), which deals with individuals proposed to serve after confirmation of a chapter 11 plan as a director, officer, or voting trustee of the debtor (among others), requires that the appointment or continuance in office of such individual be “consistent with the interests of creditors and equity security holders and with public policy.” We also counted that as a correct answer.

Q. When did the first corporate reorganization occur in the United States?

A. The first corporate reorganization is often said to have occurred in 1846, when a Georgia state court appointed a receiver over the insolvent Munroe Railway Co. The receiver successfully reorganized the railroad as the Macon & Western Railroad. See Macon & W. R.R. Co. v. Parker, 9 Ga. 377, 389-92 (Ga. 1851).

Q. How many jurisdictions are subject to the EC Regulation on Insolvency Proceedings?

A. Although the EC has 27 members (each with its own insolvency system), Denmark is not a signatory to the EC Regulation on Insolvency. Accordingly, 26 member states are subject to the Regulation.

Q: Who (full name, please!) wrote the original Collier on Bankruptcy, and what was the treatise’s original title, subtitle, and year of publication?

A. The Pele of bankruptcy, we all just know him as Collier. In 1899, William Miller (coincidence?) Collier published The Law of Bankruptcy and the National Bankruptcy Act of 1898: A Treatise on the Principles and Practice of the Law of Bankruptcy as Embodied in the New National Bankruptcy Act.

Q. What is the name of the debtors’ prison immortalized by Charles Dickens?

Q. Which of the following people has not filed a bankruptcy petition? Toni Braxton, Lenny Dykstra, Soulja Boy, or Jose Canseco.

A. This was actually an unfair question as two of the listed stars have not filed for bankruptcy. Toni Braxton has filed for bankruptcy twice, and Lenny Dykstra is currently embroiled in a bankruptcy case in which he is defending against allegations that he committed federal bankruptcy crimes by allegedly hiding, selling, or destroying items from his home. Although Jose Canseco’s mansion went into foreclosure, he did not actually file for bankruptcy protection. And Soulja Boy? He’s had his share of legal troubles, but he keeps turning his swag on and has never filed for bankruptcy protection.

]]> BANKRUPTCY BEACH READING Bankruptcy Triviahttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading-bankruptcy-trivia/
Fri, 29 Jul 2011 14:30:45 +0000http://business-finance-restructuring.weil.com/?p=3098Perhaps you will find yourself in the office this afternoon, realize that everyone else has left for the Hamptons, and wonder what you could look up on your favorite search engine while giving all appearances of doing serious research (even though no one will see you). Or, perhaps you will […]

]]>Perhaps you will find yourself in the office this afternoon, realize that everyone else has left for the Hamptons, and wonder what you could look up on your favorite search engine while giving all appearances of doing serious research (even though no one will see you). Or, perhaps you will be catching the waves on a hot and sunny day this weekend only to have to run for cover when a summer shower breaks out. Sitting in the shade, you whip out your iPad and decide to surf the net instead. What kind of research will satisfy your inner bankruptcy nerd?

Well, for today’s Bankruptcy Beach Reading, we are offering you an opportunity to participate in our first Bankruptcy Trivia contest. How well do you know bankruptcy and all its historical and literary antecedents and references? Our contest will give you an opportunity to see for yourself. Of course, you do not actually have to look up the answers on the Internet, but you can be sure everyone else will.

If you want to participate in the contest, answer the questions below no later than 5 pm on Tuesday, August 2nd. Everyone who gets all answers correct (no easy task) will be entered in a drawing to win swag from the Weil collection, including a credit card flash drive, baseball cap, t-shirt, a two-volume 2011 Mini Code, golf balls (for the slow days), and a handy Weil tote. Of course, you can also sit back, ponder the questions, and wait until next Friday, when we will reveal the answers.

]]>BANKRUPTCY BEACH READING:Letters From the Benchhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-readingletters-from-the-bench/
Fri, 01 Jul 2011 13:55:18 +0000http://business-finance-restructuring.weil.com/?p=2809Contributed by Lacey Laken It’s no secret. Sometimes the law is boring and legal writing is, well, to put it kindly, less than scintillating, and to put it accurately, turgid. The law, as documented in briefs, contracts, treatises, articles, and judicial opinions is rarely funny or even witty, and often is […]

It’s no secret. Sometimes the law is boring and legal writing is, well, to put it kindly, less than scintillating, and to put it accurately, turgid. The law, as documented in briefs, contracts, treatises, articles, and judicial opinions is rarely funny or even witty, and often is just plain dull. Although we tackle some esoteric topics here on the Blog, we try to keep the writing concise and casual. Sometimes we succeed. It is easy to get caught up in the serious nature of our work, so it is a rare treat when we read something that makes us laugh out loud – particularly when it comes from a judge. We’ve mined the archives and come up with a few of our favorite opinions and orders – ones that inspire laughter, tell a good story in a unique way, or simply turn a good phrase. We hope you enjoy them as much as we do. If you have a favorite that we haven’t included, send us a note with the citation and we’ll put it in the hopper for a future post.

A Notorious Decision

Melzer v. CNET Networks, Inc., 934 A.2d 912 (Del. Ch. 2007), is a shareholder lawsuit seeking access to the defendant’s books and records. Although the decision is notable because the court granted the plaintiff-shareholders access to books and records that predated the purchase of their stock to allow them to gain necessary information to make their case against the board of directors, it is hardly a page turner. The last sentence, however, brings some levity to the situation. Chancellor Chandler concluded, “It is about time defendant … provides the requested documents, and gets ‘going, going / back, back / to Cali, Cali.’” 934 A.2d at 920 (citing THE NOTORIOUS B.I.G., Going Back to Cali, on LIFE AFTER DEATH (Bad Boy Records 1997)). Tupac might be gone, but thanks to Chancelor Chandler and his knowledge of pop culture (or his clerk’s knowledge), Biggie Smalls lives on in the pages of the Atlantic Reporter.

Tapping At My Chamber Door

Humor is rare enough in judicial opinions, but humor in verse deserves a special call out. The text below is the opinion of the Honorable A. Jay Cristol in In re Love, 61 B.R. 558, 558-559 (Bankr. S.D. Fla. 1986), summarily denying his own motion to dismiss a case under section 707(b) of the Bankruptcy Code, which oddly permits a bankruptcy court to dismiss a consumer chapter 7 case “on its own motion.”

Once upon a midnight dreary, while I pondered weak and weary
Over many quaint and curious files of chapter seven lore
While I nodded nearly napping, suddenly there came a tapping
As of some one gently rapping, rapping at my chamber door,
“Tis some debtor” I muttered, “tapping at my chamber door –
Only this and nothing more.”
Ah distinctly I recall, it was in the early fall
And the file still was small
The Code provided I could use it
If someone tried to substantially abuse it
No party asked that it be heard.
“Sua sponte” whispered a small black bird.
The bird himself, my only maven, strongly looked to be a raven.
Upon the words the bird had uttered
I gazed at all the files cluttered
“Sua sponte,” I recall, had no meaning; none at all.
And the cluttered files sprawl, drove a thought into my brain.
Eagerly I wished the morrow—vainly I had sought to borrow
From BAFJA, surcease of sorrow—and an order quick and plain
That this case would not remain as a source of further pain.
The procedure, it seemed plain.
As the case grew older, I perceived I must be bolder.
And must sua sponte act, to determine every fact,
If primarily consumer debts, are faced,
Perhaps this case is wrongly placed.
This is a thought that I must face, perhaps I should dismiss this case.
I moved sua sponte to dismiss it for I knew I would not miss it
The Code said I could, I knew it.
But not exactly how to do it, or perhaps some day I’d rue it.
I leaped up and struck my gavel.
For the mystery to unravel
Could I? Should I? Sua sponte, grant my motion to dismiss?
While it seemed the thing to do, suddenly I thought of this.
Looking, looking towards the future and to what there was to see
If my motion, it was granted and an appeal came to be,
Who would be the appellee?
Surely, it would not be me.
Who would file, but pray tell me, a learned brief for the appellee
The District Judge would not do so
At least this much I do know.
Tell me raven, how to go.
As I with the ruling wrestled
In the statute I saw nestled
A presumption with a flavor clearly in the debtor’s favor.
No evidence had I taken
Sua sponte appeared foresaken.
Now my motion caused me terror
A dismissal would be error.
Upon consideration of § 707(b), in anguish, loud I cried
The court’s sua sponte motion to dismiss under § 707(b) is denied.

A Suit to Compensate a Tree

In Fisher v. Lowe, 122 Mich. App. 418, 419 (Mich. Ct. App. 1983), the plaintiff sought compensation for damage to an oak tree caused by a car crash. The trial court granted summary judgment for the defendants. The plaintiff appealed, and Judge Gillis of the Michigan Court of Appeals, writing for the three-judge panel, affirmed in an opinion echoing Joyce Kilmer’s poem “Tree”:

We thought that we would never see
A suit to compensate a tree.
A suit whose claim in tort is prest
Upon a mangled tree’s behest;
A tree whose battered trunk was prest
Against a Chevy’s crumpled crest;
A tree that faces each new day
With bark and limb in disarray;
A tree that may forever bear
A lasting need for tender care.
Flora lovers though we three,
We must uphold the court’s decree.

Affirmed.

Homeopathic Soup

In In re SGPA, Inc., Case No. 1-01-02609 (Bankr. M. D. Pa. Sept. 28, 2001), the debtors sought confirmation of their plan, and the creditors’ committee objected. Remarking that, although the entire committee was objecting to the plan, the only parties within the committee that would actually be impaired by the plan would have been the subordinated bondholders, the court succinctly disposed of the committee’s objection: “For the Subordinated Bondholders to assert that they represent other unsecured creditors would be an argument ‘as thin as the homeopathic soup that was made by boiling the shadow of a pigeon that has starved to death.’” Id. at 5 (citing Lincoln-Douglas Debates). Uh, point taken.

Who You Gonna Call?

In Stambovsky v. Ackley, plaintiff buyer sued to rescind the contract for the purchase of a home in Nyack, New York, because the seller had not disclosed that the house was. . .wait for it. . .here it comes. . .haunted. The trial court dismissed the claim, but the Appellate Division of the New York Supreme Court reversed, finding “as a matter of law, the house [was] haunted.” We swear we are not making this up. No summary can convey the page-turning quality of this opinion and we highly recommend that you read it for yourself (perhaps in the dark, with a flashlight), but here’s one of many passages that will long haunt home sellers:

From the perspective of a person in the position of plaintiff herein, a very practical problem arises with respect to the discovery of a paranormal phenomenon: “Who you gonna’ call?” as the title song to the movie “Ghostbusters” asks. Applying the strict rule of caveat emptor to a contract involving a house possessed by poltergeistsconjures up visions of a psychic or medium routinely accompanying the structural engineer and Terminix man on an inspection of every home subject to a contract of sale. It portends that the prudent attorney will establish an escrow account lest the subject of the transaction come back to haunt him and his client or pray that his malpractice insurance coverage extends to supernatural disasters. In the interest of avoiding such untenable consequences, the notion that a haunting is a condition which can and should be ascertained upon reasonable inspection of the premises is a hobgoblin which should be exorcised from the body of legal precedent and laid quietly to rest.

]]>BANKRUPTCY BEACH READINGhttps://business-finance-restructuring.weil.com/bankruptcy-beach-reading/bankruptcy-beach-reading/
Fri, 03 Jun 2011 13:57:40 +0000http://business-finance-restructuring.weil.com/?p=2580Periodically during the summer, we are going to publish on Fridays more lighthearted pieces about bankruptcy topics. We like to think of these as “Bankruptcy Beach Reading.” Today’s piece features a decision by Judge Cristol, a bankruptcy judge in the Southern District of Florida. Although Judge Cristol is principally known […]

]]>Periodically during the summer, we are going to publish on Fridays more lighthearted pieces about bankruptcy topics. We like to think of these as “Bankruptcy Beach Reading.” Today’s piece features a decision by Judge Cristol, a bankruptcy judge in the Southern District of Florida. Although Judge Cristol is principally known as an avid pilot, who, among other things, flew missions for the U.S. Navy during the Korean conflict, this decision shows Judge Cristol’s literary side – at least in a Seussian kind of way.

If you have any suggestions for bankruptcy topics you’d like to see us discuss in our “Bankruptcy Beach Reading” pieces, please email us. We’d love to hear your suggestions.